IKEA: more than low prices

We all know that IKEA is  a global brand in the home furnishing market with hundreds of stores across the world.

It has a clear mission: selling a wide range of furniture and accessories at a reasonable price so that most people can buy them. By offering a wide range of assortment the key word is functionality, consumers can find everything under one roof. That‘s why you can find everything at IKEA.

Its success is based on the relatively simple idea of keeping the cost between manufacturers and customers down.

In order to do so, IKEA customers have to assemble the bought products themselves. That creates innovation upstream, which helps suppliers to save costs, and downstream, as self-assembly became a large cost saver for customers.

IKEA follows all of Porters generic strategies. Its mission statement indicates a cost leadership strategy. However, the company is also applying an indirect differentiation

strategy due to its unique way of incorporating the customer in the value chain. This combination indicates a focus strategy.

Young buyers in search of stylish and fashionable furniture and household accessories at a low cost are IKEA’s targeted market segment. For these customers, the firm offers home furnishings that combine good design, functionality and acceptable quality at low prices. According to the firm, low cost is always a priority. This applies to every phase of their activities.

      ·  IKEA emphasises several activities to keep its costs low. For example, instead of relying primarily on third party manufacturers, the firm’s engineers design low-cost, modular furniture ready for assembly by customers.

     ·  IKEA also positions its products in domestic settings. Typically, competitors’ furniture stores display multiple varieties of a single item in separate rooms, meaning that their customers examine living room sofas in one room, tables in another room, chairs in yet another location, and accessories somewhere else entirely. In contrast, IKEA’s customers can view different furniture combinations (complete with sofas, chairs, tables, and so forth) in a single setting, which eliminates the need for sales associates or decorators to help the customer imagine how a furniture arrangement would look when placed in the customer’s home. This approach requires fewer sales personnel, allowing IKEA to keep its costs low.

    · A third practice that helps keep IKEA’s costs low is expecting customers to transport their own purchases rather than providing a delivery service.

      Ikea Commercial

Although a cost leader, IKEA also offers some differentiated features that appeal to its target customers, including in-store playrooms for children, wheelchairs for customer use and extended hours.

IKEA’s focused cost leadership strategy finds the firm offering some differentiated features with its low-cost products.

IKEA customers are actively involved in the shopping experience. Its concept relies on customers to choose, collect, transport and assemble IKEA products themselves. Customer involvement contributes to IKEA low prices. That is the idea behind: "You do your part. We do our part. Together we save money."

IKEA had been successful in almost all countries, because of public awareness of the its brand. IKEA is far more than a furniture merchant. It sells a lifestyle that customers around the world embrace as a signal that they have arrived, that they have good taste and recognise value.